Kochi and Ahmedabad franchises likely to replace CSK and RR in IPL

With the Lodha panel’s verdict, Chennai Super Kings (CSK) and Rajasthan Royals (RR) have been suspended for two years from IPL. The BCCI also stated that it respects the verdict of the Lodha Commission and will abide by their decisions. The IPL Governing Council has created a group headed by Chairman, Rajeev Shukla that will look into the issue and come up with recommendations within a time period of six weeks.

The absence of two teams is expected to have a large impact in terms of the revenues on the tournament. The CSK team according to American Appraisal Inc., a consulting firm, has a brand value of $72 million (approx. Rs.455 crore at the time). Media reports had revealed that CSK was worth Rs.1,000 crore in April this year. Rajasthan Royals which was brought in 2008 for $67 million, in 2012 had seen its valuation increase by 300% to $226.5 million. The two teams together bring in franchise fees to BCCI of Rs.95 crore. Apart from this the two teams spent Rs.6.2 crore in player auctions during IPL 8. This is far less than the Rs.113 crore CSK and RR spent during the auctions in the previous year’s edition. More than Rs.60 crore could be estimated to be lost from franchise sponsorship revenues of the two teams. CSK especially had a huge draw in terms of brand sponsorship and could see all the brands exiting their association with the team. If the two teams exit and IPL is left with six teams, it is likely that brands sponsoring the IPL may consider reworking their deals. The revenues from IPL sponsorships could see a hit of around Rs.90 crore according to media reports. Number of matches reducing after the exit of the two teams would also impact TV revenues of MSM. Last year it was estimated a loss of Rs.350-400 crore would be incurred to MSM due to the significant reduction in the inventory by the CSK and RR suspension said a media report.

The BCCI will look to avoid such losses as the IPL is one of the highest revenue earning steams for the board. There are already media reports on the possible introduction of two teams to replace CSK and RR. The two new teams could include Kochi Tuskers franchise returning back to the IPL and the other likelihood is a team from Ahmedabad. According to reports, BCCI officials have said that they will give a chance to Kochi team that only survived for one year in the league. If the Kochi franchise owners take up the offer then it is expected that an Ahmedabad franchise will be raised. Even if Kochi does not take up the offer, two new teams franchises are expected to be created. However, the franchise fees for these two new teams are expected to be double of the Rs.95 crore paid by CSK and RR together. BCCI member Niranjan Shah in a media report said the two new teams should bring in at least $25-30 million (approx. Rs.160-190 crore) to the board.

Around 10-15 bidders are expected to participate in the auctions for the two teams. The Ahmedabad team for IPL is expected to have received interest from the Adani Group for acquiring the franchise according to a media report. While the Kochi Tuskers had various shareholders the maximum shares comprising of 31.4% owned by Anchor Earth and Parinee Developers 30.6%. The reason for the Kochi team to come back into the IPL is as it had recently won the case against termination by BCCI in 2011 and BCCI has been asked to pay Rs.550 crore to the Kochi Tuskers franchise.

Kochi Tuskers was earlier terminated for breaching its terms of agreement and this was because the franchise’s inability to furnish a new back guarantee for 2011. This is the reason the BCCI had taken the decision to terminate the contract once the franchise failed to produce it before the deadline. This resulted in case being filed against the BCCI by the Kochi franchise and recently on July 8, 2015 former Chief Justice of India R.C. Lahoti had asked BCCI to pay Rs.550 crore to the Kochi franchise. This is after the ruling was in favour of the Kochi franchise. The Kochi franchise has however stated that it does not want the money anymore and wants to field its team for IPL’s next season.

The ratings of Kochi Tuskers during the IPL season 4 had done reasonably well and managed to get the second highest ratings in the 6 metros in the initial few games of the season. The Mumbai Indians vs. Kochi Tuskers match played on April 15, 2011 brought in ratings of 6.74 TVR in the top 6 metros market for CS4+ according to TAM Sports data. It was second to the match between CSK and Kolkata Knight Riders which brought in ratings of 7.77 TVRs. This is a good rating considering the highest rated match in IPL 8 was the finals between Mumbai Indians and CSK which brought in ratings of 7.4 TVRs. However, the viewership measurement has increased and now gone beyond the top 6 metros to include a much larger viewing audience. Another match between Kochi Tuskers and Pune Warriors got in ratings of 4.32 TVRs.

Ahmedabad with a large cricket-loving population could be the reason for the BCCI to look at it closely as a next team. There had also been much demand for the creation of Ahmedabad team with the popularity of the spot and the rising stature of the city as the financial capital of Gujarat.

However, things will only be clear only six weeks from now after the IPL Governing Council comes out with its recommendations.